Emily Coltman FCA, Chief Accountant to FreeAgent – which provides the UK’s market-leading online accounting system specifically designed for micro businesses and freelancers – explains how getting your Self Assessment sorted now could actually save you a lot of time, hassle and money in the long run.
More time to register
If this is the first year you’ve prepared a tax return, you will need to register with HMRC to file your returns online, if you haven’t already done so.
However, registering to file online will involve HMRC sending you an activation PIN code in the post, which takes at least 7 days to arrive. And if you wait until December to register, that means your PIN is likely to get mixed up with the huge extra volume of letters delivered around Christmas – and it could take weeks to arrive, or even be completely lost.
Avoid the stress of extended waiting by registering with HMRC now.
More time to find an accountant
Unless your business is the very simplest and smallest of sole trades, and you have no other income such as income from a job or property, you would be well advised to ask an accountant to help you prepare or check your tax return.
However, accountants are very busy in the run-up to tax return season and many of them charge an extra premium to new clients who join them in January with a tax return to prepare that month. Some start charging higher fees as far back as November.
Also, not all accountants are alike, so you need to make sure you find an accountant you are comfortable working with, who you can understand, and who understands you and your business. That’s not going to be easy if you’ve left your search until January and are rushing around trying to find someone to help you.
Start looking now and you stand a much better chance of finding the right accountant, not only to help you prepare this year’s tax return, but also to establish a sound long-term business relationship with.
More chance of accurate figures
The longer you leave it to file your tax return, the more likely it is that you will forget to include something – such as interest on a particular bank account – or to enter incorrect figures. And if you’re rushing to pull everything together in the final few days before the deadline passes, you’re even more likely to miss something important out.
Give yourself plenty of time and save yourself the worry of trying to pull all your figures together in a rush. And remember that you can also re-submit your tax return if you discover errors in the future – so if you file now, you can still do a final double-check before the January 31st deadline passes and have time to make any final amends.
Tax can be collected through your PAYE tax code
If you want HMRC to collect any tax you owe by changing your tax code, you’ll have to file your tax return online by 30th December. You’ll only be able to do this if you owe less than £3,000 in tax, and if you have a tax code (which would be if you are employed and pay tax under PAYE, or if you receive a taxed private pension).
Clear the decks for Christmas
Christmas is often the busiest time of the year for businesses, with orders to fulfil and dispatch. And that’s without even thinking about personal preparations such as buying and wrapping gifts, buying, writing and sending cards, buying food etc… And then, of course, there’s the start of the New Year to come after that, which is the time to start working towards your business resolutions – not stressing about your tax return.
Give yourself one less thing to think about in the run-up to Christmas by filing your tax return now
You’ll avoid incurring any fines
This is perhaps the most obvious benefit of filing early, but it’s also one of the most important. By getting your tax return out of the way and submitted to HMRC long before the January 31st deadline passes, you won’t incur any fines from HMRC for filing late.
Those fines are as follows:
● A £100 instant fine for not submitting your return by the January 31 deadline
● £10 a day fines for up to 90 days if you don’t file by April 30th
● A £300 fine (or 5% of the tax you owe – whichever is the greater number) if you still don’t file your tax return for 90 days after April 30th
● An additional £300 (or 5% of the tax you owe – whichever is greater) if you still haven’t filed within a year
● Additional penalties if HMRC believes you are intentionally delaying your filing. This may include a fine of up to 100% of the amount of tax you owe
Get your Self Assessment sorted and file your tax return now to avoid having to pay any of these penalties!
Emily Coltman FCA is Chief Accountant to FreeAgent, which provides the UK’s market-leading online accounting system specifically designed to meet the needs of micro businesses and freelancers. Try it for free at www.freeagent.com
Image: Paper work via Shutterstock